SAFE Agreements in Turkey: Legal Risks for Foreign Startup Investors (2026 Updated Guide)

Can foreign investors use SAFE agreements when investing in Turkish startups? Learn the risks involving enforceability, share conversion, corporate approvals, valuation caps, dilution, foreign exchange rules, exits and investor protection.

SAFE agreements have become a popular early-stage investment instrument internationally because they allow an investor to provide capital without immediately completing a traditional priced equity round. Instead of receiving shares at signing, the investor generally receives contractual rights designed to convert into equity when a specified future event occurs. For a foreign investor considering a Turkish startup, however, simply importing a standard foreign SAFE template can create significant legal and commercial risks. Turkish corporate law does not automatically reproduce every corporate mechanism assumed by a foreign-law SAFE. The investor must therefore examine whether the promised conversion can actually be implemented within the Turkish company’s corporate structure, whether the necessary shareholder and capital procedures can be completed, what happens if no financing round occurs, and whether the agreement adequately protects the investor in an exit, insolvency or shareholder dispute.

What Is a SAFE Agreement?

SAFE generally refers to a Simple Agreement for Future Equity. The investor provides funding to a startup in return for contractual rights that may result in shares being issued or transferred upon a future financing, liquidity event or another contractually defined trigger.

Unlike a conventional share purchase, the investor usually does not become a shareholder immediately merely by transferring the investment amount.

This distinction is particularly important in Turkey.

Can SAFE Agreements Be Used for Turkish Startups?

A SAFE-style contractual structure can potentially be used in a Turkish investment transaction, but the agreement should be designed around the company’s actual legal form and the mandatory corporate procedures required to implement future equity rights.

A foreign template should not be treated as automatically self-executing under Turkish company law.

The First Question: What Type of Turkish Company Is Receiving the Investment?

The legal structure of the startup matters considerably. A joint stock company and a limited liability company are subject to different rules concerning capital, shares, transfers and corporate decision-making.

The SAFE should therefore be reviewed together with the articles of association, shareholder structure and capitalization table.

A SAFE Investor Is Not Necessarily a Shareholder

One of the greatest practical risks is assuming that payment itself gives the investor shareholder rights.

Until the contemplated equity conversion is legally completed, the investor may not possess ordinary shareholder rights such as voting, participation in general assembly decisions, dividends or other statutory rights associated with ownership.

The contract should state the investor’s interim position clearly.

Future Conversion Must Be Legally Implementable

A SAFE may promise that the investment automatically converts during the next financing round. Contractual language alone, however, may not complete every corporate action required to issue or transfer shares in a Turkish company.

The transaction should therefore anticipate the corporate approvals and implementation steps necessary at conversion.

Capital Increase Procedures Can Become Critical

If conversion is expected to occur through issuance of new shares, the company may need to complete a capital increase in accordance with the applicable corporate framework.

The SAFE should address who must take the required actions and what happens if shareholders or directors refuse to cooperate.

Existing Shareholders Can Create Conversion Risk

A founder may sign an investment document expecting future conversion while other shareholders later oppose the transaction.

Before investing, foreign investors should determine whether all persons whose cooperation may be necessary have already undertaken enforceable obligations to support implementation.

Pre-Emption Rights Must Be Reviewed

A future issuance of shares can interact with existing shareholders’ rights to participate in capital increases.

The transaction structure should therefore be examined before promising the investor a fixed conversion outcome.

Articles of Association Matter

The company’s articles may contain provisions affecting capital increases, share classes, transfers, privileges, governance and other corporate matters.

A SAFE should never be reviewed in isolation from these documents.

Shareholders’ Agreements Must Also Be Checked

Existing shareholders may already have contractual rights concerning new investments, pre-emption, anti-dilution, reserved matters, transfers or investor consent.

A new SAFE can create contractual conflicts if those rights are ignored.

Valuation Cap Is a Major Economic Term

A valuation cap generally determines a maximum valuation used for calculating the investor’s conversion economics.

Foreign investors should understand precisely whether the cap applies on a pre-money or post-money basis and how the company’s capitalization is defined.

Ambiguous drafting can produce substantial differences in ownership percentage.

Discount Rights Must Be Defined Clearly

Some SAFE structures provide a discount to the price paid by investors in the future financing round.

The agreement should specify how the discount interacts with the valuation cap and which calculation produces the applicable conversion price.

Cap Table Definitions Can Change the Result

Options, employee incentive arrangements, warrants, convertible instruments and other SAFEs can materially affect dilution.

The investor should request a fully diluted capitalization table before signing.

Multiple SAFEs Can Cause Unexpected Dilution

A startup may issue several SAFEs at different valuation caps and discounts.

The economic effect of all outstanding instruments should be modeled together rather than analyzing the foreign investor’s SAFE individually.

What Happens If There Is Never Another Financing Round?

This is one of the most important questions.

Some startups never complete the financing event expected when the SAFE is signed. The agreement should explain what happens if the triggering event does not occur for several years.

Otherwise, the investor may remain in contractual limbo without shares and without ordinary debt repayment rights.

Is a SAFE a Loan?

A SAFE is generally designed differently from a conventional loan, but its characterization should not be assumed merely from its title.

The actual contractual rights—including repayment obligations, maturity, return provisions and conversion mechanics—should be reviewed carefully under the governing legal and tax framework.

Avoid Creating an Accidental Hybrid Instrument

If the agreement combines mandatory repayment, fixed return, maturity and future equity rights, the resulting legal and financial characterization may differ from what the parties intended.

Substance is more important than simply calling the document a SAFE.

What Happens If the Startup Is Sold Before Conversion?

The SAFE should define a liquidity event and specify the investor’s rights if the company is sold before an equity financing.

The investor should understand whether it receives cash, conversion rights or another contractual entitlement.

Exit Waterfall Must Be Modeled

A headline company sale price does not necessarily equal the amount available to the SAFE investor.

Debt, liquidation preferences, transaction costs, existing preferred rights and other instruments can materially affect distributions.

What Happens If the Startup Fails?

The agreement should address dissolution or insolvency scenarios.

A SAFE investor should not assume that its investment enjoys the same priority as secured creditors or that the original investment amount will necessarily be recoverable.

Insolvency Risk Is Significant

Early-stage investment capital can be lost entirely.

Contractual priority language cannot simply override mandatory insolvency rules or superior rights held by other creditors.

Information Rights Should Be Considered

Because the SAFE holder may not yet be a shareholder, statutory shareholder information rights may not be available.

Foreign investors may therefore negotiate contractual reporting rights concerning financial statements, budgets, major liabilities, fundraising and significant corporate events.

Reserved Matters Can Be Difficult Before Conversion

An investor who has not yet become a shareholder may want protection against actions that could destroy the economic value of the future equity.

Contractual restrictions might address extraordinary transactions, new securities, related-party transfers or major asset disposals, but they must be carefully designed and made binding on the appropriate parties.

Founder Obligations Can Be Important

If implementation depends on founders voting for a capital increase or taking other corporate actions, consider whether the founders themselves should undertake contractual obligations.

An obligation binding only the company may be insufficient where shareholder action is necessary.

Founder Departure Risk Should Be Addressed

A founder may leave before conversion.

Foreign investors should examine existing vesting, good-leaver, bad-leaver and share-transfer arrangements to understand how founder departure could affect the investment.

Anti-Dilution Protection Requires Careful Drafting

A SAFE’s valuation mechanics may provide some economic protection, but they should not automatically be confused with traditional anti-dilution rights.

If subsequent securities are issued on more favorable terms, determine whether the SAFE investor receives any corresponding protection.

Most-Favored-Nation Clauses May Help

Where multiple convertible instruments may be issued, an investor may negotiate rights allowing it to benefit from certain more favorable terms granted later.

The scope and exceptions should be drafted precisely.

Foreign Investor Rights After Conversion

The SAFE should address what class and type of shares the investor will receive.

It should also specify whether the investor becomes subject to an existing shareholders’ agreement and what governance rights apply following conversion.

Board Representation Is Not Automatic

A future equity interest does not necessarily guarantee a board seat.

If board representation or observer rights are commercially important, they should be negotiated expressly.

Minority Investor Protection Should Be Planned in Advance

Once converted, a foreign investor may hold a relatively small percentage of the company.

Governance protections can therefore be as important as valuation.

Relevant matters may include information rights, reserved decisions, related-party transactions, new share issuances, major borrowing and asset sales.

Share Transfer Restrictions Matter

Existing documents may contain lock-ups, rights of first refusal, pre-emption rights, tag-along provisions and drag-along provisions.

The investor should understand how these restrictions will apply after conversion.

Tag-Along Rights Can Protect Foreign Investors

If founders or majority shareholders sell their shares, a minority foreign investor may want the ability to participate in the sale.

This should be coordinated with the company’s wider shareholder documentation.

Drag-Along Rights Need Careful Review

A drag-along provision may force the investor to sell in a future exit.

Thresholds, price equality, warranties and liability limitations should therefore be reviewed carefully.

Intellectual Property Due Diligence Is Essential

A startup’s value may depend primarily on software, algorithms, patents, trademarks, data or other intellectual property.

Before funding, determine whether the company actually owns or validly controls the intellectual property it claims to own.

Founder-Owned IP Creates Risk

Where key technology remains personally owned by founders or contractors, the investor may fund a company that does not legally control its core asset.

Appropriate assignments should be completed where necessary.

Employee and Contractor Agreements Should Be Reviewed

Software and technology developed by employees or external contractors can create ownership disputes.

Foreign investors should include intellectual-property ownership in pre-investment due diligence.

Data Protection and Regulatory Compliance Matter

Startups operating in FinTech, healthcare, artificial intelligence, e-commerce and other regulated sectors may face significant compliance obligations.

A favorable valuation does not compensate for a business model that cannot lawfully operate.

Foreign Exchange and Cross-Border Payment Structure Must Be Reviewed

A foreign investor transferring funds into a Turkish startup should determine how the investment payment will be documented and recorded.

The transaction should be coordinated with the company’s bank, accounting records and applicable foreign-exchange framework.

Investment Currency Should Be Defined

The SAFE should specify the investment currency and explain how future conversion calculations involving another currency will be handled.

Exchange-rate ambiguity can materially change the investor’s economic outcome.

Tax Consequences Should Be Reviewed Before Signing

The parties should consider the tax and accounting treatment of the funding, conversion and eventual exit.

A contractual structure copied from another jurisdiction may not produce the same tax consequences in Turkey.

Governing Law Requires Strategic Consideration

Foreign investors sometimes prefer foreign governing law.

However, even where contractual obligations are governed by foreign law, implementation of share issuances, corporate resolutions and other internal corporate matters concerning a Turkish company can still require compliance with mandatory Turkish corporate rules.

Arbitration Can Be Considered

Cross-border investors may prefer arbitration for contractual disputes.

The arbitration clause should be coordinated with the governing law, seat, language, interim-relief strategy and the types of disputes that may arise.

Enforcement Strategy Should Be Considered Before the Dispute

A sophisticated agreement is of limited value if the investor cannot practically enforce it.

Determine where the company, founders and relevant assets are located and how contractual obligations would be enforced.

Personal Founder Commitments Require Separate Analysis

A founder signing only on behalf of the company is different from a founder assuming personal contractual obligations.

The document should make the capacity in which each party signs completely clear.

Due Diligence Should Not Be Skipped Because the Investment Is Small

SAFE rounds often move quickly, encouraging investors to perform minimal diligence.

Foreign investors should at least verify corporate ownership, capitalization, existing convertible instruments, material debt, intellectual property, litigation and regulatory status.

Request the Full Cap Table

The investor should identify all existing shareholders and outstanding rights capable of creating future equity.

Undisclosed options, convertible debt or earlier SAFEs can materially alter the expected percentage.

Check Corporate Authority Before Transferring Funds

Confirm that the company has properly authorized execution of the investment agreement and that the signatory has authority to bind it.

Do not transfer investment funds merely on the basis of a founder’s informal assurances.

Side Letters Can Create Hidden Rights

Other investors may have received additional governance, information or economic rights through side letters.

Where commercially appropriate, the foreign investor should investigate whether undisclosed preferential arrangements exist.

Representations and Warranties Remain Important

Even an early-stage transaction may justify representations concerning capitalization, authority, intellectual property, litigation, regulatory compliance and financial liabilities.

The scope should reflect the size and risk of the investment.

Misrepresentation Can Lead to Separate Claims

If founders deliberately provide false information concerning revenue, customers, intellectual property or capitalization, the investor’s remedies may extend beyond ordinary conversion disputes.

Preserve due-diligence materials and written representations.

What If the Company Refuses to Convert the SAFE?

The first question is whether the contractual conversion event occurred and whether the company and relevant shareholders are legally obligated to implement the required corporate actions.

The investor may need to seek contractual enforcement, damages, interim measures or other remedies depending on the structure.

Interim Measures May Become Important

If founders attempt to transfer assets, issue new shares or restructure the company while a serious investment dispute is pending, urgent protective measures may need to be evaluated.

The remedy depends on the contractual and corporate circumstances.

Foreign Investors Should Plan the Conversion Before Signing

The best time to solve a conversion problem is before the investment is made.

The transaction documents should answer who must approve the conversion, what shares will be issued, how the price is calculated, how dilution is determined and what happens if any required party refuses to cooperate.

2026 Practical Strategy for Foreign Startup Investors

Foreign investors considering a SAFE investment in a Turkish startup should treat the instrument as part of a broader corporate transaction rather than a standalone two-page contract. Before funding, the investor should review the company’s legal form, articles of association, shareholders’ agreement, capitalization table, outstanding convertibles, intellectual property, material liabilities and regulatory position. The SAFE should then be structured so that its future conversion mechanics can actually be implemented under Turkish corporate law.

Frequently Asked Questions

Are SAFE agreements legally possible in Turkey?

SAFE-style contractual arrangements can potentially be structured for Turkish startup investments, but their corporate implementation should be designed around Turkish company law rather than copied mechanically from a foreign template.

Does signing a SAFE immediately make the foreign investor a shareholder?

Generally, the investor should not assume so. The SAFE commonly creates contractual future-equity rights, while shareholder status depends on the transaction structure and completion of the relevant corporate steps.

Can a SAFE automatically convert into shares?

The contract may provide for conversion, but the necessary Turkish corporate actions must still be legally implementable.

What is the biggest risk for a foreign SAFE investor?

One of the largest risks is paying the investment amount while leaving future conversion dependent on corporate actions that the agreement has not adequately secured.

What happens if the startup never raises another round?

The answer depends on the SAFE. The agreement should specifically address the possibility that the anticipated financing event never occurs.

Can a SAFE investor receive voting rights before conversion?

Not automatically merely because money was invested. Any interim contractual protections should be negotiated separately.

Should the investor review the shareholders’ agreement?

Yes. Existing shareholder rights may directly affect future conversion, dilution, transfers and governance.

Can foreign law govern a SAFE involving a Turkish startup?

The parties may consider governing-law structures, but mandatory Turkish corporate requirements can remain relevant to implementation of equity rights in a Turkish company.

Is arbitration suitable for SAFE disputes?

It can be considered for cross-border contractual disputes, provided the arbitration agreement is carefully structured and coordinated with corporate-law issues.

What should a foreign investor do before transferring the investment?

Verify the cap table, corporate authority, existing investor rights, intellectual-property ownership and regulatory position, and ensure that the SAFE contains a legally workable conversion mechanism supported by the company and every shareholder whose cooperation may be required.

Client-Focused Legal Support for Foreign Startup Investments

SAFE investments in Turkish startups can involve future share conversion, valuation caps, dilution, capital increases, shareholder approvals, intellectual-property ownership, founder obligations, minority protection and cross-border investment disputes. Fırat Fesih Kaya Law Office assists foreign investors, international venture capital participants and companies investing in Turkish startups. Lawyer Fırat Fesih Kaya provides legal assistance in structuring and reviewing SAFE and convertible investment arrangements, conducting corporate due diligence, negotiating shareholder protections, coordinating future equity conversion and handling disputes arising from failed or contested startup investments.

Phone: +90 312 434 22 22
Mobile: +90 532 769 22 22
Email: info@firatfesihkaya.av.tr
Address: Mevlana Boulevard No:221, Yıldırım Tower, Office No:148, 06520 Balgat, Çankaya, Ankara, Turkey